A Security Is Sold to the Public Under a Private

question 398

Multiple Choice

A security is sold to the public under a private placement exemption. Later a suit is filed under the federal securities law claiming securities fraud. This suit will:

• A) fail since the security is not subject to the federal law since it was sold under an exemption
• B) fail since the security is not subject to the federal law since it was sold under an exemption⎯unless there were subsequent financial disclosures to the SEC
• C) fail since the security is not subject to the federal law since it was sold under an exemption⎯unless a private common law fraud suit has already prevailed
• D) be allowed only if there was a blue sky law violation
• E) none of the other choices

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Definitions:

Moral Hazard Insurance

Situations in insurance where the existence of insurance coverage can lead to riskier behavior by the insured, as the consequences of that behavior are partially absorbed by the insurer.

Disability Insurance

A type of insurance that provides financial support to a person who is unable to work because of a disability.

Unemployment Insurance

A government-provided benefit offering temporary financial assistance to unemployed workers who meet certain eligibility requirements.

Mutual Fund

An investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.